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Dale Miller, Editor,
National Hog Farmer
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Market Preview
Look for
Analysis of USDA Report
Watch your inbox Monday for our Hogs and Pigs Report
Review. The report will be released at 2 p.m. CDT on Friday and
promises to be one of the most watched and analyzed USDA reports in
quite some time. USDA obviously missed the Dec. 1 market hog
inventories badly, and it will be interesting to see how they have
adjusted to account for the impact of circovirus vaccines, potentially
higher productivity, etc.
Of particular note will be whether any of the 2007 breeding herd
estimates are revised. Some analysts believe that circovirus vaccines
alone cannot explain the increase of market hog supplies and, therefore,
that past sow herds must have been underestimated. I can understand
that feeling, but I’m not in that camp completely. My take from many
conversations over the past year is that the vaccines were indeed that
effective, and that the slow erosion of pig survival and performance
that took place over the past 3-4 years got reversed in a big hurry.
With that said, the magnitude of the numbers over the past six months
has been astounding. It now appears that we will slaughter just fewer
than 29.3 million head under federal inspection in the first quarter of
2008 alone. That will be far and away the largest first quarter
slaughter total, and will not be far behind last fall’s record total
of 30.094 million head.
Calculating Canadian Imports
Analysts have long relied on two sources of data regarding livestock
imports from Canada. One is the monthly import data published by
USDA’s Economic Research Service, based on data generated by the
Department of Commerce’s U.S. Customs Service. These data are
believed to be accurate but they take over a month to get published.
January 2008 data were published in mid-March, for instance.
The other shortcoming in the monthly data is that it contains no
breakouts of the type of animals being imported if they weigh over 50
kg. or 110 lb. The “feeder pig” weights (i.e. under 110 lb.) are
broken into three groups: under 7 kg. (15.4 lb.), 7 to 23 kg. (15.4 to
50.6 lb.) and 23 to 50 kg. (50.6 lb. to 110 lb.). But everything that
weighs over 110 lb. is lumped together in just one category.
The monthly data series is useful to document history and has served as
the basis of much of our monitoring system for imports and exports.
Annual totals for pig imports from Canada (simply the sum of the monthly
data each year) appear in Figure 1, and clearly show that imports of
feeder pigs and heavier hogs both set records in 2007 with 6.72 million
feeder pigs and 3.28 million market hogs coming to the United States.
But data that are six weeks old when they are published are not terribly
useful for monitoring current market conditions or animal flows,
especially when economic forces are causing some major adjustments in
either the Canadian or U.S. sectors. Weekly data published by USDA’s
Agricultural Marketing Service have long been relied upon for this more
“up-to-the-minute” analysis. USDA veterinarians that inspect
documents and animals at the border generate this data. I think these
people do a good job of inspection, but providing accurate data is not a
big part of their job description and, as it turns out, the data they
provided may not have been very accurate.
On Thursday, USDA released revised weekly import data for 2007 and
year-to-date 2008. It is based on the same papers and reports that were
used to generate the original data, but instead of visually classifying
the animals, the market animals are classified according to their
destination. That is, a load headed for Newburn, TN, (the location of
the Jimmy Dean sow slaughter plant) is classified as cull sows. A load
headed for Worthington, MN, (the location of a JBS-Swift butcher hog
plant) is classified as market hogs.
The different approach resulted in some major changes, which are shown
in Figure 2. The numbers of market hogs were generally decreased in
each month, while the number of cull sows and boars was increased pretty
dramatically in virtually every month.
The table in Figure 3 shows the comparisons of the old and revised data
for 2007. There wasn’t much problem with feeder pigs as they were
clearly smaller than the other animals. In addition, the totals for
both series are quite close. But the numbers for market hogs and cull
sows and boars are sharply different. And that difference is possibly
important.
Many analysts (including me) have wondered for some time how we could
see so few Canadian cull-breeding animals coming south, and yet hear of
massive liquidation in Canada. The old data say that cull sow and boar
imports are only 8.4% higher year-to-date in 2008. The new data say
that number is 13.3%. The new data tell us that nearly 49,000 more sows
and boars (an average of over 4,400/week) have been shipped to the
United States since Jan. 1. That number represents 3% of the Jan. 1
Canadian breeding herd! The difference is important indeed.
How accurate are the new data? We don’t know yet and only time will
tell. But here is one encouraging measure. The old import data and
Canadian sow slaughter implied an annual cull slaughter rate of only 35%
in Canada in 2007. That is very low when compared to U.S. slaughter of
U.S. sows that amounted to 47.6% of the December breeding herd
inventory. The new Canadian import data imply a Canadian cull slaughter
rate of just over 50% -- much more reasonable. The inclusion of boars
confounds these data a bit, but it appears to me that the new data are
very likely an improvement. Let’s hope they remain so.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com
Introducing the new PIC Camborough® Family
You asked for greater lifetime reproductive performance and longevity.
You asked for more pounds of pork marketed per sow. You asked for a
higher percentage of market pigs in the full-value pay box.
Take another look at our new Camborough family, we think you will like
what you see--after all, it is just what you asked for.
www.pic.com/usa
Financial Preview
Equity Erosion
Continues
The swine industry is going through a very painful
period. To put it in perspective, let’s suppose the average producer
is losing $30 a head every day. Let’s also assume an average U.S. hog
slaughter of 425,000 head/day, meaning the swine industry is now losing
$12.75 million each day. With at least 22 days of slaughter each month,
the industry is losing $280.5 million a month. This situation has been
occurring for at three months – and probably closer to 4-1/2 months
– resulting in a loss of $841 million for the first three months of
2008.
Now I realize that some producers have some margin protection, but the
point that I am making is that equity is eroding very quickly in the
industry.
Let’s take the example of a 5,000-sow producer who on Oct. 1, 2007 had
a net worth of $4 million on total assets of $5 million, which equates
to 80% owner equity. Let’s also say this producer has been marketing
8,200 head a month, with a loss of $20/head, for almost six months.
That’s 8,200 x 6 months = 49,200 head x $20 = $984,000. In six months,
this producer has lost nearly a million dollars, and almost 20% of his
net worth. At this point, the producer and his lender should start
addressing this erosion of equity.
What Should You Do? This is a very commonly asked question in the
past six months. Many producers are in a state of shock. Examine the ups
and downs of feed costs from March 13 through March 25, and it’s easy
to see why. Corn prices have dropped almost 60¢/bu., and then moved
back up 40¢/bu. Soybean meal prices have dropped $80 a ton, but moved
up $40 a ton earlier this week. Feed prices are whipsawing so fast that
most producers are reluctant to do anything. Staying on the sidelines
seems at times the safest bet. Risk management will separate the best
from the rest in the future.
Benefit of Circovirus Vaccines – After looking at hog slaughter
numbers and the cold storage report, it’s obvious there is a lot of
supply to work through. Here are a couple of thoughts on numbers and the
benefits of the circovirus vaccines.
If mortalities, lights and culls are reduced by 5%, there could be the
equivalent of in excess of 2.8 million more pigs due to the benefits of
the circovirus vaccines. The December Hogs and Pigs Report stated there
are more than 56 million head on feed (56 x 5% = 2.8 million pigs that
need to be marketed over an estimated 27-week period; 2.8 million head,
divided by 27 weeks, = 103,704 head more pigs/week; divide 103,704 by
5.5 work days/week = 18,855 more pigs harvested per day.
In addition to the benefit of reduced mortality, pigs are also gaining
better due to circovirus vaccination. This is a large part of the reason
why pig numbers and slaughter weights are not coming down.
A Plea to All Swine Producers – If this equity erosion
continues, producers will face some very difficult decisions in the days
ahead. One approach that might help: reduce sale weights by at least 5
lb. per head (I’d prefer 10 lb.). That would help get harvested
numbers down to a more reasonable level.
However, at 430,000 head slaughtered/day, this will be difficult. But if
numbers drop below 420,000 head/day, and sale weights are reduced, that
might help the industry’s supply issues. A 5-lb. reduction on 420,000
head a day is equivalent to a little more than 8,000 head a day (420,000
head x 5 lb. = 2.1 million lb. of pork/260 lb./animal = 8,077 head at
260 lb.
Pork producers are going to need to take a proactive approach to reduce
supply and drive the improvement of pork prices.
Mark Greenwood
Swine Industry Consultant
Contact Greenwood at mgreenw@agstar.com
Ingelvac CircoFLEX® vaccine makes it easier to protect pigs from
PCV2 as early as 3 weeks of age or older . It starts early and stays
late.
Call Boehringer Ingelheim at 1-800-325-9167.
Legislative Preview
Close
Facilities That Slaughter Downed Animals
Senator Diane Feinstein (D-CA) has introduced
legislation that would close slaughter facilities that repeatedly
process downed animals and offer stiff fines and temporary one-year
shutdowns for first- and second-time violators. Senator Feinstein said,
“Millions of pounds of potentially tainted, recalled meat made its way
into school cafeterias across this country. Companies responsible for
this kind of activity shouldn’t just receive a slap on the wrist. The
safety of our food supply cannot be taken lightly.” Under this
legislation, slaughterhouses would face fines and other penalties if
caught trying to slaughter downed livestock. These include:
- A fine for a first violation, based upon a percentage of the
facility’s gross income. The secretary of agriculture would determine
that percentage.
- USDA inspection services would be suspended for one year following
a second violation, effectively shutting down the facility during that
time.
- A third violation would require the USDA to withdraw the
facility’s Grant of Inspection – resulting in the permanent shutdown
of the facility.
The legislation would also require USDA to release the names of
establishments that have received recalled products.
CSP Sign-up — Secretary of Agriculture Ed Schafer announced a
sign-up for the Conservation Security Program (CSP) that will be
available starting on April 18 to approximately 64,000 eligible farms in
51 watersheds covering more than 23.7 million acres. CSP is a voluntary
conservation program that supports ongoing stewardship of private,
agricultural working land and rewards producers who are meeting the
highest standards of conservation and environmental management in their
operations. Payments can include three components:
- An annual stewardship component for the base level of conservation
treatment;
- An annual component for maintenance of existing conservation
practices; and
- An enhancement component for exceptional conservation effort.
Enhancement activities could include limited pesticide applications,
renewable energy generation, and widening existing riparian forest
buffers for restoring critical stream habitat. Additional information
on CSP, including eligible watersheds and a CSP self-assessment
workbook, are available at www.nrcs.usda.gov/programs/csp.
Global Food Reserves Lowest in 30 Years -- The United Nation’s
Food and Agriculture Organization (FAO) has indicated that worldwide
food reserves were at their lowest level in 30 years, providing for only
53 days of food, compared with 169 days in 2007.
Child Cost – Child Care and Education Rises — According to
USDA’s Center for Nutrition Policy and Promotion (CNOPP) report,
middle-income families with a child born in 2007 will spend $204,060 to
provide food, shelter, clothing and other necessities by the child’s
18th birthday. The annual study reports that the cost of feeding a
child is less expensive than it once was, while child care and education
costs rose considerably. Since 1960, the “cost of providing food
decreased from 24% to 17% of total child-rearing costs, while child care
and education expenses increased from 2% to 12%,” USDA said. Housing
accounts for 33% of total costs.
P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.
Make ileitis disappear?
Denagard® (tiamulin) 10 is approved to control ileitis in as little
as 10 days. And with its small dosage -- 35 grams tiamulin/ton -- and
less medication time, no other feed medication is as cost-effective for
controlling ileitis.
Click
on the Denagard logo to learn more.
Pork Industry Calendar
April 21, 2008: Missouri
Pork Profit Seminar & PQA-Plus Certification Spring 2008 Series,
Kurzweil’s
Country Meats, Harrisonville, MO; contact Diane Slater at (573) 445-8375
or
diane@mopork.com.
April 28, 2008:
Missouri
Pork Profit Seminar & PQA-Plus Certification Spring 2008 Series, MFA
Research Farm, Marshall, MO; contact Diane Slater at (573) 445-8375 or
diane@mopork.com.
April 30, 2008: Missouri Pork Profit Seminar and
PQA-Plus Certification Spring 2008 Series, Lake Lenore Hall, Mexico, Mo;
contact Diane Slater at (573) 445-8375 or diane@mopork.com.
Click
here to get National Hog Farmer's complete pork
industry calendar.
 Hermitage NGT
Hermitage NGT offers their North American clients:
- Breeding Stock (GGP/GP/Parent stock)
- Semen-fresh & frozen
- Closed herd breeding programs
- Genetic monitoring through the Hermitage BLUP recording system
Talk with our team of specialists in genetics, reproductive physiology,
nutrition, veterinary medicine, pig production management and A.I. to
design a program to allow you to take advantage of these exciting
genetics.
www.hermitagengt.com
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